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A new study has found that using carbon tax revenue to fund free green electricity and public transport could reduce greenhouse gas emissions.
The paper shows that if these services were provided for free, they could reduce home energy emissions by 13.4% and motor fuel emissions by 23.8%.
The same tax rate applies to every taxpayer, regardless of income, makes carbon taxes on home energy and motor fuel more burdensome for low-income households. They contribute less to climate change than high income households.
The revenue from carbon taxes is used to reduce emissions and fuel poverty. They found that giving free green services would be more effective than redistributing tax revenue to the population to address the effects of taxes on lower income people.
The study was led by a professor. Carbon taxes on home energy and motor fuels are likely to be part of government strategies to achieve climate targets, but they put higher burdens on low-income households than on rich households. Governments need to find ways to compensate people who are disadvantaged by climate policies.
Providing people with green living options, like free green electricity and free public transport, is promising because it's re-distributive, saves emissions and reduces fuel and transport poverty.
The European Household Budget Surveys (HBS) provide household expenditure data on home energy and motor fuel in 27 European countries. Expenditure data and emission factors were combined to estimate greenhouse gas emissions per household for home energy and motor fuels.
They looked at the impact of introducing two different compensation strategies on low-income households.
Giving cash back through tax rebates would result in only small reductions in home energy and motor fuel emissions if you don't bring in low carbon investments.
The introduction of universal green vouchers with expanded renewable electricity generation and public transport would reduce home energy emissions by 13.4% and motor fuel emissions by 23.8%.
If green vouchers and infrastructure were provided without carbon taxes, emission savings would be slightly lower, but 4.1% and 2% of households would be lifted out of fuel and transport poverty respectively.
Fuel and transport poverty would be increased by 4.1% and 1.8% if carbon taxes and cash compensation were combined.
The findings show that policies that aim to compensate for unfair distributional impacts of carbon taxes need to be combined with additional environmental interventions.
Fuel and transport poverty should be minimized so that social and environmental objectives can be met.
The paper "Fairness, effectiveness, and needs satisfaction: new options for designing climate policies" was published in Environmental Research Letters.
There are new options for designing climate policies. It's called 10.1088/1748-9326/ac2cb1
Environmental Research Letters is a journal.
There is a news story about free green services that could substantially reduce emissions.
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